100% Rebate XM automatic Transfer to Your MyWallet Account everyday! , The Biggest XM Cashback Rebate in the World..!

Select you Language

EN - English ID - Bahasa Indonesia AR - العربيّة ZH - 简体中文 HI - हिंदी UR - اردو BN - বাংলা VI - Tiếng Việt TH - ไทย KO - 한국어z


The Relationship between Number of Trading Positions and Risk/Reward Ratio in Forex Trading

This case study aims to explore the relationship between the number of trading positions and the risk/reward ratio in forex trading, as well as the importance of the risk/reward ratio in achieving consistent trading results in the long term.

As an experiment, a trader uses the price action method and opens trading positions 20 times in 2 weeks on the currency pairs EUR/USD, GBP/USD, and AUD/USD in their demo account. Each position is opened with a risk/reward ratio of 1:2, with a stop loss level of 50 pips and a target profit of 100 pips. The trading results are recorded in a history table as follows:

No.

Currency Pair

Result

1

EUR/USD

Profit

2

GBP/USD

Loss

3

AUD/USD

Loss

4

EUR/USD

Profit

5

GBP/USD

Loss

6

AUD/USD

Profit

7

EUR/USD

Loss

8

GBP/USD

Profit

9

AUD/USD

Profit

10

EUR/USD

Profit

11

GBP/USD

Loss

12

AUD/USD

Loss

13

EUR/USD

Loss

14

GBP/USD

Profit

15

AUD/USD

Profit

16

EUR/USD

Profit

17

GBP/USD

Loss

18

AUD/USD

Profit

19

EUR/USD

Loss

20

GBP/USD

Loss

From the table above, it can be seen that out of 20 trading positions, there are 12 positions that incurred losses and 8 positions that made profits. Although the loss percentage is 60%, due to the predetermined risk/reward ratio (1:2), the overall trading results still yield a profit.

This indicates that the proper implementation of the risk/reward ratio can be a crucial factor in achieving positive trading results in the long term. With the risk/reward ratio set from the beginning, traders can control risks and increase profit potential.

To obtain more consistent trading results, it is recommended for traders to combine the price action method, which has a high probability, with the implementation of money management that prioritizes a risk/reward ratio of at least 1:2. Therefore, traders can achieve profitable and consistent trading results in the long term.

For traders using the price action method, it is advisable to wait for valid price action setups on the daily chart before opening trading positions. By applying a risk/reward ratio of at least 1:2, traders can control risks and consistently increase profit potential.

In conclusion, the risk/reward ratio plays a significant role in the final trading outcome, and its proper implementation can help traders achieve long-term success.

Share:



Download Platforms

(MetaTrader for PC, Mac, Multiterminal, WebTrader, iPad, iPhone, Android and Tablet)


Popular Posts